Desperate Suntech sells Solar Panels for a huge Loss

Suntech – Sequence of Events leading it to the current State

Suntech (STP) is the company known for its massive management blunders and huge losses since 2010. Suntech was in news again in October 2012, after top managers exit despite restructuring by UBS. The hiring of top investment bank UBS to restructure its debt also did not help the stock or the company’s operations. The company made a series of mistakes like Signing a number of long term polysilicon and wafer supply agreements paying huge amounts as prepayment, despite the small companies going bankrupt, Making costly investments into thin film technology, bad capital structure, vertically integration into wafers and ingots exactly at the wrong time. 

Then in March 2013, Suntech faces the moment of truth as Founder ousted and more than $500 million debt becomes due and finally the company’s debt default in March 2013. The main subsidiary of Suntech went bankrupt in March 2013. Wuxi accounted for about half of Suntech’s 20,000 employees. The solar market oversupply, global solar trade wars paired with Suntech’s management forced the action. Again in April 2013, Suntech stock surged almost 28%, after a rumor that the world’s smartest investor Warren Buffet would buy the company. 

Steep Decline in STP Stock Price

The Suntech Stock has seen a huge decline in the last five years. Below is the graph depicting the stock price of STP for the last five years starting 2009. STP stock got hammered very badly in the last five years. There was a steep decline in 2009, followed by the stock price going further down to the current level of ~1$ from ~50$ levels achieved in 2008.

STP stock over the last five years

Suntech sells products at heavy discount

Now in an attempt to survive, Suntech sold its project and solar panels for huge losses to Shunfeng Photovoltaic International Ltd. for $15.2 million. The panels will be sold at 49 cent per watt. This price is approximately 30% less than the industry average of 72~75 cent per watt of solar panels. Suntech needs to develop a market in China, if its wants to survive the anti-dumping proceedings of Europe against China. It could be that Suntech started its discount sale, in lieu of the above.

Businessweek

Suntech to sell a project and discounted panels to Shunfeng Photovoltaic International Ltd. (1165) for 93 million yuan.

Shunfeng, which hasn’t developed projects before, will use 29.7 megawatts of Suntech panels to build the Kumul solar plant in China’s Xinjiang region near the China-Mongolia border.

The panels will be sold in installments for a total of 89 million yuan, the Changzhou, China-based company said. The 49-cent per-watt price is 32 percent less than the 72-cent average for solar panel prices as of May 22, according to a Bloomberg survey.